Monday, February 19, 2001

Will Whitman Follow New Environmentalism Path Blazed In New Jersey? published on techcentralstation.com

“Results-based management is what it's all about,” Robert Shinn, New Jersey’s Commissioner of Environmental Protection, tells Tech Central Station’s New Environmentalism hostess Lynn Scarlett. He says new Environmental Protection Agency Administrator Christine Todd Whitman was instrumental in focusing New Jersey on promoting economic growth and a better environment at the same time. Promoting innovation and getting away from “pin-the-tail-on-the-donkey” enforcement accomplished this, Shinn notes. “We've sort of taken the approach that we all breathe the same air, we drink the same water, and partnerships are better than facing each other in a courtroom,” he says. And “if I had to guess where the governor was going to go, it would be right in the same direction.”

Lynn Scarlett: New Jersey's one of the pioneers of new environmentalism -- the use of incentives, greater flexibility and private-sector innovation to meet environmental goals. Gov. Christine Todd Whitman kind of presided over your efforts during much of this, and now she's off in Washington as the new Environmental Protection Agency administrator. Did she play a role or did this kind of come out of the state agency by itself?

Robert Shinn: The governor laid out some pretty specific goals. We were in an economic recession when she took office, and New Jersey was a little bit deeper than most states. And this agency got blamed for a significant portion of that. So, she wanted to put a program together that was on two tracks: One track was that it would support a healthy economy; the other was that it wouldn't sacrifice environmental quality to do so. Now, traditionally, when the economy's bad you usually get a little better environmental quality because plants aren't running, people aren't driving as much, and so on. So, we had to figure out a way to separate those two graphs – the one that graphs economic prosperity, and if that's going up, usually the graph for your emissions is going up with it. So, what we've tried to do is find the technologies that would separate those two graphs that are running pretty parallel.

Scarlett: So you could have both a better economy and a better environment at the same time?

Shinn: Exactly, promote technology, both from an energy perspective and from a general environmental perspective. And we've been doing that. We have an office of innovative technology and market development since '94. And we've been certifying technology with several other states. So, that's developing very well.

Scarlett: Looking into the crystal ball, do you envision the former governor kind of carrying this sort of thing forward at the national level?

Shinn: Yeah, if I had to guess where the governor was going to go, it would be right in the same direction. That's where her heart would be, basically in this two-track approach. And what you do with a business sector in that approach is you get a buy-in, committing to do more from an environmental perspective. It's not sacrificing one for the other. They co-exist together.

Scarlett: What is needed to do that?

Shinn: You've got to create a dialogue. It just doesn't happen when you throw the switch and say this is my idea. You've got to work at it and you've got to get buy-in from the regulated community. And we've spent a lot of time doing that.

Scarlett: What headed you in this goals-setting, incentives-based direction in the first place?

Shinn: As you know, New Jersey's the most densely populated state in the nation. And we've got a tremendous amount of industrialization, both old and new. And when I looked at our pollution permitting system and what we had to do from a health-based perspective, I just knew we had to do something different. We had good experience with facilities-wide permitting program. We piloted it to the federal effort and facilities-wide permitting jointly. And we did, over a period of a half-dozen years, about 16 or so facilities. That taught us that pollution prevention pays big dividends. We did a cross section of industry and small business, large business, and found that there were really a lot of beneficial emission reductions out there if we had the right programs to go after them. But it took us a long while to do the 16 permits. The reason we decided not to go ahead with facility-wide permitting, even as effective as it is, was that it's too labor intensive. We'd have to have two people for every 20 facilities in New Jersey.

Scarlett: So, what happened then?

Shinn: I took a trip to the Netherlands to investigate what they were doing in about '94, and I was really fascinated by what they were doing. They had sectors of industry that they were really negotiating covenants with, like the chemical industry. These covenants covered different sectors and the sectors have goals. The Netherlands put out the goals; the sectors identify how they intend to meet the goals; then the regulators, will come to the table and see if a sector’s plans will meet their milestones.

Scarlett: Were you able to apply this approach in New Jersey?

Shinn: We sort of did, in 1995, where we brought industry and the environmental community to the table and tried to do a rulemaking from soup to nuts. It was not exactly the Netherlands' process, but at least we had industry at the table. And that worked pretty well. We introduced emissions trading (between businesses within an industry) at that time, for NOx (nitrogen oxide) and VOC (volatile organic compounds), and so we started experimenting with that. We found that incentives are good, the trading worked out well for us over the years. And we've added C02 (carbon dioxide) to that since we started out with our original trading program.

Scarlett: Essentially, it seems that you’re sitting down with an industry, rather than with an individual company, and saying, “Here's the challenges we face.” Then you say, “How can we meet those challenges to meet our overall goals?” And you sign this covenant, which is kind of like a contract in a sense?

Shinn: In essence, that's it. It's an agreement. We use covenants with different sectors. We're negotiating one now with a utility company for pollutant reductions of C02, NOx, S02 and mercury. And we hope to be successful with that. It looks like it's going in a good direction, and it's one of the major utilities in New Jersey.

Scarlett: Is this the process that led to your Gold and Silver Track Program?

Shinn: Exactly. And while this was going on, the whole voluntary international standard outlining guidelines for environmental management was happening internationally. Its focus is really pollution prevention. And what we looked at is how do we harness a program that is sort of self-executing -- if you sign up with the goals and principles, and that's ultimately what we built into Silver One.

Scarlett: How does that work? I'm a company, and I have an environmental management system in place? So I come to you and say I've got this, what happens?

Shinn: We basically have a discussion, and we look at your enforcement record. You've got to have a pretty clean enforcement record for five years. And then you sign an agreement with us that says you're in compliance, and you commit to stay in compliance. And that's sort of the entry test. And then the rest of it is the pollution prevention principles. We give you some permit flexibility as you get into that process.

Scarlett: From a company's standpoint, why would I want to do this?

Shinn: We give the companies recognition. We've developed a flag and an emblem, a sign, that a company can post that it’s a Silver Track company; that it’s participating. The company gets to use it in its advertising, marketing.

Scarlett: It seems to me, at least with companies I run into, they are always saying that's nice, but I also want streamlining of permitting and I want this to cost less.

Shinn: The next level, Silver Two, gets into more permitting flexibility. We have a pre-construction permit in New Jersey that gets involved in small sources, and we give you relief from that in the Silver Two. So, as you move up from Silver One to Silver Two to Gold, there's more flexibility. But there's more commitment, too. You're committing in Silver Two to our CO2 program, which is to produce 3.5 percent less CO2 than 1990 by 2005. We started to look at CO2 in 1996, when we were looking at our coastal program. We had a sea-level rise issue, and the consensus at that time was: Let's go down this road, because it's the only way we have if the science is accurate that we are having an impact on sea level. Let’s start doing some things in that regard that makes sense anyway. I'm talking primarily about energy efficiency and pollution prevention.

Scarlett: The kind of "no regrets" idea, so even if the climate change thing proves to be not upon us, you would get gains anyway, so you might as well go ahead and do that.

Shinn: Yeah. If you get more energy efficiency out of a ton of fossil fuel, for instance, doubling it as you can do in certain cases, you reduce your other emissions by 50 percent. And it's not only NOx and S02 and mercury, but it's also air toxins. It's the collateral benefits that is the most advantageous to implement this program. We think the nice part about this is that it's not like tacking extra controls on a stack or building a treatment plant for different pollutants. You're really using pollution control and energy efficiency techniques to minimize emissions. And that's really a saving; that's not a cost. You could say it's a capital investment up front, but the paybacks on the capital investment are fairly short.

Scarlett: Are you finding that that is the case for companies that are participating, they're actually reporting back that by doing this we actually are getting some cost savings?

Shinn: Yes. We're fairly early in this process, but we have companies like Johnson & Johnson and Dupont that have made significant commitments. We've just signed up our 50 colleges and universities in New Jersey, both on our climate-change goal and to commit to offer curriculum courses on energy efficiency and pollution prevention. So, we're teaching the engineers and scientists of tomorrow; they're going to be specking out these facilities.

Scarlett: For energy efficiency?

Shinn: Yeah. It just fits in. And we're trying to do that across the board. We've got our Board of Public Utilities in New Jersey that is about to come out with a program -- Societal Benefit Charges -- that will produce in the area of $350 million in benefits over three years.

Scarlett: And centerpiece of all that is to use kind of an incentive approach, rather than the more traditional regulatory approach?

Shinn: Exactly. In New Jersey, the traditional regulatory approach just doesn't get you there. You just find that there's got to be a better way to do it, less command and control; more education oriented, more instruction oriented, more partnership oriented. And that's what we try to achieve. We try to create a different atmosphere. If you go in this direction, there are financial benefits, there are regulatory benefits, and you know where you are. We look at a 15-year permitting program as three five-year back-to-back segments, so you can get longer-term forecasting. From a capital budgeting standpoint, if you wanted to do heat and power within your company, that's something you have to get in a capital budgeting scheme and this allows you to do that.

Scarlett: So in the past, you would have what, much shorter?

Shinn: Five years, and then all bets are off at the end of the five years. This gives you predictability, and that's what we're trying to do. What we found in talking to the business community is that they'd say, "If you can do more that gives us some flexibility, gives us some predictability, and we'll do more. Don't command and control us to death, and we'll both get farther down this road.”

Scarlett: Many environmentalists are out there eyeing from the old command and control point of view what New Jersey and other states are doing, and they're saying: "I don't know if we like this flexibility stuff. We think this might be a race to the bottom." How do you respond to that?

Shinn: We take a lot of grief over our enforcement aspect of this. But the major difference in our enforcement program before this approach and after is that we don't play pin the tail on the donkey, which used to be a standard practice. When you have that atmosphere, people hide from you. So, we've sort of taken the approach that we all breathe the same air, we drink the same water, and partnerships are better than facing each other in a courtroom.

Scarlett: The way I'd put this is it's problem solving, rather than a punishment, as the default position. The enforcement's still there, but that isn't the purpose.

Shinn: Compliance is what our goals are. And, of course, even for the people who are achieving our goals, making significant investments and finding new ways to do things, you need enforcement for the people who aren't complying with the rules. You can't set businesses on some fool's errand doing all this capital expenditure and have their next-door neighbor eat up all the improvements by not complying with the rules. So, we still have a very strong enforcement program. We're closer together in New Jersey. And we do such an intensive monitoring program, both air and water, and we have such a comprehensive GIS (geographic information system) program and a watershed program -- we've got people across the state analyzing watersheds.

Scarlett: But for the most part, what you're telling me is you're actually turning your focus not just to the punishment side but actually to how are we performing?

Shinn: Exactly, results-based management is what it's all about. We're measuring the indicators that are the result of our efforts. If the indicators aren't moving in the right directions, we've got to make changes that will move them in the right direction.

Scarlett: When you transition away from the old pin-the-tail-on-the-donkey approach, it seems to me that there's going to be a period where there's a little wariness. How did you go about building trust?

Shinn: Just kept talking about what we were trying to achieve. And then trying to get companies to sign up as leaders in their community to work with us in developing the concept and participating.

Scarlett: Do you as a commissioner in New Jersey feel like there are any legislative or regulatory changes needed to better do what you're doing?

Shinn: Absolutely, and they happen all the time, for example in brownfields. We found there were a lot of brownfields – contaminated industrial, storage and waste sites -- that we could remediate. We've had several interactions with the legislature on further incentivizing brownfields. We have a program now that will get to the next level of sites that won't justify investment in them by their own remediated value, the ones that sort of creep up into the circular type or Superfund sites. You go through our department of commerce and economic development; it has to be approved by us and the treasury. And then there's Economic Development Authority funding available for the cleanup of a site and the development of that site. We will pay 75 percent of the cleanup cost to the developer.

Scarlett: This is a way to get the thing cleaned up and back into productive use where it otherwise wouldn’t happen?

Shinn: Exactly. Here’s one quick example of how it works; the first one we have done. An old steel-tube manufacturer had about a 30-acre site in Edison, New Jersey, and the cleanup costs were a little over $2 million. After the site was cleaned up, they developed the site. They've now got a Home Depot, Office Depot, a bank, several other service facilities on this site. The revenue, for the first nine months of operation, was about $3 million. So, the state gets sales tax on $3 million; they paid property taxes back to Edison of about $1 million. And now we've got a cleaned up site, and the investment of $1.6 million that we paid for the cleanup, out of the $2 million cleanup, has come back within the first year.

Scarlett: How does that compare with your experience with federal Superfund sites or sites that have to go through the federal process?

Shinn: Oh, my god. Well, first you have to hope to live long enough to see the end of the process. And, second, there's so much front-end legal planning in the Superfund process that it just hasn't produced the results. We've had some bad sites that were cleaned up, and we lead the country in cleaned-up sites and number of sites and everything else. But I think the number of sites and the new process that's been developed by brownfields is so much more aggressive. It's not just government paying out tax dollars to get something done. It's triggering private investment by keeping their holding times and carrying costs as small as possible, and helping them in financing of the project. So, I'm real enthusiastic about this program.

Scarlett: But what stands in the way of Superfund doing similar things?

Shinn: We haven't been very successful modifying Superfund. The Superfund program sort of has a stigma with it now – not only practically but politically. To revive Superfund, or restructure it hasn't happened yet. Maybe it will, and I'm all for doing that. But I think rather than put our eggs in that basket, if we could just move the brownfield programs that are working, and get more federal support for that.

Scarlett: Do you think with the new leadership at the EPA you’ll get that?

Shinn: The governor stated publicly that she wants to get more money into brownfields. I keep calling her the governor, not the administrator, I'm going to get into trouble doing that. But I think that's the way to go.

Scarlett: Well, thank you for your time, you’ve been extremely generous.

 

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